How a card transaction flows

Below are the core stages you’ll see from sale to settlement. Knowing these terms helps when troubleshooting declines, reconciling batches, or explaining timing to customers.

  1. Card entry: Customer provides card data (chip, swipe, tap, or keyed). The point-of-sale or payment page formats the request.
  2. Authorization: The gateway sends an authorization request through the card network to the issuing bank, which checks funds, account status, and fraud signals and then returns approved or declined.
  3. Authorization hold: If approved, the issuer places a hold for the authorized amount; funds are reserved but not yet transferred.
  4. Capture: The merchant confirms the charge (immediately or in a batch). Capture converts the hold into a request for settlement.
  5. Clearing and settlement: The card network transmits settlement files between issuer and acquirer; money moves from the cardholder’s bank to the merchant’s processor, minus fees.
  6. Funding and reconciliation: The processor deposits net funds into the merchant account and provides reports for accounting. Disputes or chargebacks can still alter settled amounts.

Understanding these stages helps with timing expectations, troubleshooting declines, and managing reconciliation.